Easing Inflation and AI Rally Push Stocks Toward Records | The Close 8/13/2026

ROMAINE: INFLATIONARY PRESSURES EASE, AI ENTHUSIASM SWELLS. STOCKS BACK TOWARD A RECORD HIGH. LIVE HERE AT BLOOMBERG HEADQUARTERS IN NEW YORK, I'M ROMAINE. I ALMOST FORGOT HOW TO START THIS SHOW. >> AND I AM ISABELLE LEE. WE ARE KICKING YOU OFF TO CLOSING BELL IN THE U.S. AND THIS IS WHERE WE STAND. GOT MORE INFLATION PRINT TODAY AND IT SHOWED INFLATION IS MODERATING, WHICH MEANS THE FED WILL PROBABLY REFRAIN FROM RAISING INTEREST RATES NEXT MONTH. YOU ARE SEEING AN S&P NEAR RECORD HIGHS. UP BY AROUND .6%. THE NASDAQ IS HIGHER BY NEARLY 1.5%. I WANT TO BRING YOUR ATTENTION TO THE U.S. YEAR YIELD. ABOUT AN HOUR AGO THE U.S. SOLD 30 YEAR BONDS AT THE HIGHEST RATES SINCE 2001. OF COURSE, IT'S GOING TO BE HEADING FOR PRESIDENT DONALD TRUMP. NOW WE ARE LOOKING AT CRUDE OIL. DOWN BY 2.5%. ROMAINE: A RECORD HIGH FOR THE S&P. TODAY COULD BE A RECORD HIGH FOR BOTH LARGE-CAP AND SMALL-CAP BENCHMARKS. AN ENCOURAGING SIGN THAT WALL STREET'S BULLISHNESS WAS NOT MISPLACED. TWO BENIGN INFLATION REPORTS, A SOLID EARNINGS SEASON PROVIDING PROOF OF LIFE ARE EXTENDING THIS BULL MARKET. SEVEN MONTHS AGO STRATEGISTS WERE ANTICIPATING EARNINGS FOR THE S&P COMPANIES AS A WHOLE, UP $306 A SHARE THIS YEAR. TODAY SCOTT CRONAN AND HIS TEAM BUMPING THEIR FORECAST TO AMONG THE HIGHEST BY STRATEGIST TRACT BY BLOOMBERG. THE EARNINGS SEASON IS SHAPING UP TO BE ONE OF THE BEST THREE-MONTH PERIODS IN SOME TIME. PROPER -- PROPER GROWTH RUNNING MORE THAN 30%. STRATEGIST EXPECTS PROFIT GROWTH -- THAT WOULD BE A FOUR-QUARTER STREAK ABOUT 20%. A STREET THAT HAS OCCURRED ONLY 10 TIMES SINCE 1936. THE NOT SO SECRET SAUCE KEEPING THINGS GOING? AI. FROM THE REVENUE BOOST PRODUCTIVITY GAINS FOR THE COMPANIES THAT ARE ADOPTING IT. >> EVERY COMPANY I TALK WITH HAS 12 TO 15 USE CASES ON AI ADOPTION AND IS OPTIMISTIC THAT THEY ARE GOING TO FIND WAYS TO IMPROVE MARGINS, IMPROVE THEIR BUSINESS, IMPROVE PRODUCTIVITY. I THINK YES AND P, BROAD EARNINGS STORY IS ALIVE AND WELL NOT JUST THIS YEAR, BIT INTO THE FUTURE. ROMAINE: APPLIED MATERIALS IS SET TO REPORT AFTER THE ANALYSTS SEEING STRONG PROSPECTS THE COMPANY WILL SIGNAL DEMAND GOING FOR. WE GOT A PREVIEW OF THAT A FEW HOURS AGO WITH SANDISK. THE FLASH MEMORY MAKER THE BEST-PERFORMING STOCK OUT THERE THIS YEAR. HOLDING AN INVESTOR DAY AT NYC AND SAYING IT EXPECTS ITS REVENUE TO GROW AT A MID TO HIGH TEENS RATE AT THE RELEASE 2030. GET THIS, POST MARGIN IS GOING TO SUSTAIN ITSELF AT 80%. ISABELLE: THAT IS REALLY SHOCKING NUMBERS. IT SEEMS LIKE THE AI CRAZE IS CONTINUING AND SHOWS NO SIGNS OF STOPPING. I WANT TO THAW -- I WANT TO TALK ABOUT AI STILL. THIS CHART IS REALLY, FOR ME IT STRUCK ME BECAUSE THE WHITE LINE IS THE BANK OF AMERICA MOMENTUM INDEX AND YOU SEE THE BLUE LINE THAT IS THE ONE THAT TRACKS THE LONG-TERM EARNINGS GROWTH EXPECTATIONS. AS YOU CAN SEE, BOTH ARE REBOUNDING, BUT LOOK AT HOW SHARPLY MOMENTUM HAS STEPPED BACK. THAT IS THE QUESTION FOR THE AI TRADE. CAN EARNINGS GROWTH JUSTIFY THE RENEWED RALLY? PRICES CRACKED, WHILE EXPECTATIONS HELD UP BETTER. BOTH ARE RISING AGAIN. THIS SUGGESTS THAT FUNDAMENTALS MAY BE STARTING TO CATCH UP WITH MOMENTUM. ROMAINE: THAT MOMENTUM MAY BE CATCHING UP WITH EARNINGS. EARNINGS CATCHING UP WITH MOMENTUM? TAKE YOUR PICK. DARRELL CRONK, AT WELLS FARGO, PRESIDENT OF WELLS FARGO INVESTMENT INSTITUTE. IT IS WHERE I WANT TO START WITH YOU. YOUR THOUGHTS ON THE AI TRADE? IS THIS ONE OF THOSE THINGS YOU BUY INTO? THAT YOU ADD WHEN YOU SEE THOSE TIPS? DARRELL: I THINKING YOU -- I THINK YOU DEFINITELY HAVE TO ADD WHEN YOU SEE THE DIPS. IN THE SHORT TERM, SINCE THE JULY 29 BOTTOM TECH AS A SECTOR IS UP ABOUT 12 TO 13%. SHE'S JUST A WHITE-HOT MOVE. I THINK YOU HAVE GOT TO HAVE A LITTLE BIT OF A DIP, A LITTLE BIT OF THE MOMENTUM TRADE COMING BACK OFF THE BOIL. JUST AT THE BROAD INDEX LEVEL THE S&P TODAY IS ABOUT 11% ABOVE ITS 200 DAY MOVING AVERAGE. THAT PUTS IT USUALLY IN HISTORICALLY OVER-BALL CONDITIONS IN THE NEAR TERM. IT WOULD NOT SURPRISE ME AS WE GET INTO SEPTEMBER AND OCTOBER THAT YOU SEE A LITTLE BIT OF PROFIT-TAKING, POSITIONING, SOME OF THAT PROFIT PUSHING PRICES BACK DOWN, BUT I WOULD USE THAT AS A BUYING OPPORTUNITY. ROMAINE: CERTAINLY YOU LOOK AT SOME OF THE TECHNICAL INDICATORS LIKE THEY ARE ASSIGNED THE S&P, CONSIDERED TO BE OVERBOUGHT, BUT I GUESS THE QUESTION -- AND IT IS SOMETHING A LOT OF PEOPLE HAVE RAISED, IS THAT YOU CAN LOOK AT THOSE METRICS AND SAY THINGS ARE OVERBOUGHT, BUT THEN YOU LOOK AT THESE INCOME STATEMENTS SOME OF THESE COMPANIES AND THEY ARE OVER-EARNING. DARRELL: 100%. I WILL NOT DRAIN THE CONVERSATION ABOUT AI BECAUSE EVEREADY TALKS ABOUT. THE MOST IMPORTANT AND RELEVANT THINGS FROM Q2 WERE, NUMBER ONE, NOT THE BOTTOM-LINE EARNINGS GROWTH, BUT THE TOP LINE 15% REVENUE GROWTH ACROSS THE INDEX. THAT IS UNHEARD OF. BUT TWO, YOU HAVE A BROADENING OF THOSE DATA EARNINGS, SO YOU HAVE 10 OF THE 11 SECTORS NOW IN POSITIVE TERRITORY FOR EARNINGS GROWTH AND EIGHT OF THOSE ARE IN DOUBLE-DIGIT EARNINGS GROWTH. AND PEOPLE FORGET TO TALK ABOUT ALL THE BENEFITS MARGIN AND EARNINGS THAT CAME THROUGH THE ONE BIG, BEAUTIFUL BILL, OF ALL OF THE DEDUCTIBILITY OF THAT CAPEX SPENDING, ANY FRACTURING STRUCTURES, EQUIPMENT. IF YOU ARE GETTING AI DRIVING THE TOPLINE GROWTH BUT GETTING THE BENEFIT IN MARGIN AND EARNINGS THROUGH THE ONE BIG, BEAUTIFUL BILL TEXTED ACTIONS THAT IS A RECIPE FOR DOUBLE-DIGIT GROWTH FOR QUARTERS TO COME. ISABELLE: YOU ARE BULLISH ON EQUITIES BUT TELLING CLIENTS TO REBALANCE. HOW DO YOU SQUARE THOSE TWO VIEWS TOGETHER? DARRELL: I THINK YOU HAVE TO BE SELECTIVE IN WHERE YOU HAVE YOUR EXPOSURE. CERTAINLY WE LIKE ATTACK AND HAVE FOR QUITE A LONG TIME. IT HAS BEEN AN OVERWEIGHT IN OUR PORTFOLIOS, BUT YOU CAN LOOK AT TECH-ADJACENT PLACES LIKE UTILITIES, WHICH HAVE BEEN BEATEN UP, OR ATTRACTIVE. MATERIALS, WHICH HAVE UNDERPERFORMED, WHICH ARE GOING TO BENEFIT NOT JUST THE AI BUILD, THE HYPERSCALERS, BUT REALLY THAT NEXT WAVE OF AI, WHICH IS ALL ABOUT THE INTEGRATION AND MONETIZATION OF AI. THAT IS WHERE YOU ARE GOING TO START GETTING SOME OF THE BENEFIT. THEN WE THINK FINANCIALS CONTINUE TO DO WELL HERE. YOU KNOW THE STORY ABOUT HEALTHY BALANCE SHEETS, STRONG LOAN GROWTH, M&A ACTIVITY PICKING UP. ALL KINDS OF FAVORABLE THINGS FOR FINANCIALS. WE THINK THEY LOOK ATTRACTIVE TOO. ISABELLE: OIL IS BECOMING IMPORTANT FOR THE LONG END OF THE TREASURY CURVE. DO YOU THINK THAT MAKES THE FED'S JOB HARDER? DARRELL: IT DEFINITELY WILL MAKE THEIR JOB HARDER. LOOK, I THINK WE ARE BUILDING A MORE PERMANENT PREMIUM. YOU COULD CALL IT GEOPOLITICAL PREMIUM INTO THE PRICE OF OIL. I KNOW THE SUPPLY-DEMAND DYNAMICS IF YOU COULD OPEN THE STRAIT OF HORMUZ BACK UP AND BRING EVERYTHING BACK TO THE OLD NORMAL, BUT I'M NOT SURE THE OLD NORMAL IS THE NEW NORMAL ANYMORE. I THINK YOU HAVE TO THINK OF OIL AS BEING 85 DOLLARS, MAYBE $95 A BARREL. IF THAT IS THE CASE IT IS GOING TO KEEP PUSHING INFLATION PRESSURES. WE ARE HAPPY ABOUT THE CPI PRINCE THIS WEEK, BUT WE HAVE ONE MORE FULL SET OF INFLATION DATA IN AUGUST BEFORE THE FED HAS ITS SEPTEMBER MEETING AND MAKES A DECISION ON INTEREST RATES. ROMAINE: WITH THE FOCUS ON THE AI TRADE, AND OBVIOUSLY IT IS A DRIVER OF THE MARKETS AND THE ECONOMY, WE WOULD BE REMISS TO NOT POINT OUT OUR ECONOMY AND THE MARKET IS DIFFERENT BY THE CONSUMER. WHEN YOU TAKE A LOOK AT THE ECONOMIC LANDSCAPE DO YOU HAVE CONFIDENCE THAT CONSUMER IS GOING TO COME THROUGH FOR US IN THE REST OF THE YEAR? DARRELL: IT'S INTERESTING, BECAUSE YOU CAN ALMOST FLIP THE SCRIPT HERE AND SAY, THE CONSUMER UNDER THE SURFACE WHEN YOU LOOK AT WHETHER IT IS CREDIT CARDS, AUTO LOANS, DELINQUENCIES, DEFAULTS, SPENDING HABITS ALL LOOKS FAIRLY HEALTHY. I WOULD NOT CALL OR CRAZY ROBUST, BUT IT LOOKS HEALTHY. THE CONSUMER AS A WHOLE WE THINK IS OK AND WILL CONTINUE TO BE OK TO THE REMAINDER OF THIS YEAR. WHAT IS INTERESTING AS WE HAVE BEEN UNDERWEIGHT THE CONSUMER SEGMENTS OF THE MARKETS. THANKS STAPLES, DISCRETIONARY, WHICH HAVE MATERIAL -- MATERIALLY UNDERPERFORMED THE BROAD INDEX BECAUSE THAT PRICING POWER IS GETTING MORE DIFFICULT TO PUSH THROUGH IN CORPORATE AMERICA IN THE CONSUMER SPACE. I THINK IT IS A LITTLE TALE OF TWO HALVES. THE ACTUAL CONSUMERS DOING OK. I WOULD NOT WANT TO HAVE EXPOSURE IN MY PORTFOLIO TO CONSUMER STABLE OR DISCRETIONARY NAMES IN MY PORTFOLIO. ROMAINE: ALWAYS A PLEASURE. DARRELL CRONK, CIO OF WEALTH AT WELLS FARGO KICKING US OFF TO THE SPEAKING OF THE CONSUMER, A LOT OF MALT OPERATORS RALLYING. ARE THERE SIGNS THAT MAY BE THAT PULLBACK IN INFLATION IS FUELING A COME BACK FOR THE CONSUMER, AND SPECIFICALLY I COME BACK FROM ALL REAL ESTATE? WE ARE GOING TO CATCH UP WITH NAVEEN JAGGI OVER AT JLL. ISABELLE: FROM FOODCOURT TO THE BASKETBALL COURT, WE WILL UNPACK THE DEAL OF BOB IGER AND JOSH KUSHNER FOR THE L.A. LAKERS WITH BOBBY SHARMA, FOUNDING PARTNER BLUESTONE EQUITY PARTNERS. ROMAINE: WE'RE GOING TO TALK ABOUT THE WORLD OF PRIVATE ASSETS AND INSURANCE AND TRACKING THE EXPLOSION OF FUND FINANCE. AND THE RELATIVELY NEW CIO AND GLOBAL HEAD OF INSURANCE AT JA B IS GOING TO BE STOPPING BY HIS WELL FOR AN EXCLUSIVE CONVERSATION. COMING UP IN A BIT ON "THE CLOSE COME," RIGHT HERE ON BLOOMBERG. -- THE CLOSE," RIGHT HERE ON BLOOMBERG. ♪ ISABELLE: THIS WEEK'S INFLATION DATA, SIGNALING EASING PRICE PRESSURES. OUR NEXT GUEST SUGGESTS THAT IS PUSHING THE PENDULUM BACK INTO POSITIVE TERRITORY FOR RETAILERS. JOINING US IS NAVEEN JAGGI, PRESIDENT OF ADVISORY SERVICES AT JLL. WE KNOW RETAIL DEMAND BOUNCED BACK IN Q2. WE KNOW MALL-MAXING IS BECOMING A THING. I GREW UP GOING TO THE MALL WITH MY MOM A LOT. IS THAT A SAME THE CONSUMER IS HEALTHIER THAN THE SENTIMENT SURVEYS WE ARE SEEING SUGGEST? NAVEEN: I THINK AT THE END OF THE DAY IF WE ARE TALKING ABOUT THE MALL, THE MALL IS BACK. WE HAVE GONE THROUGH ABOUT 10 YEARS NOW CLOSING DOWN ROUGHLY FIVE HUNDRED MILES ACROSS AMERICA, WHICH MEANS REMAINING BALLS THAT ARE STANDING ARE THE ONES THAT HAVE PERFORMED AND YOU WILL SEE THE INVESTORS IN THOSE MALLS DATING BACK. WHO WOULD HAVE THOUGHT IN 2026 WE ARE SPEAKING ABOUT THE MALL RATS BEING BACK? THAT 1980'S TERM IS MORE SALIENT THAN IT HAS BEEN IN A LONG TIME. ISABELLE: THAT IS A NEW TERM FOR ME. WHERE IS THAT MONEY COMING FROM? OUR HOUSE YIELDS -- HOUSEHOLDS FEELING BETTER, OR ARE SOME HOUSEHOLDS PRIORITIZING RETAIL OVER OTHER EXPENSES? NAVEEN: I THINK THE HOUSEHOLDS FOR THE MOST PART, IF YOU TAKE BACK TO SCHOOL SHOPPING, VERY BULLISH, UP 10% FROM LAST YEAR. WHAT WE ARE ALSO SEEING IS THE CONSUMERS ARE BEING CAREFUL ABOUT WHAT THEY ARE BUYING THEMSELVES. USED TO BE THE PAST THAT IF YOU GO OUT SHOPPING WHICH UP A LITTLE BIT FOR YOUR FAMILY AND STOP FOR YEARS -- AND SHOP YOURSELF. MOST CONSUMERS SAY THEY ARE GOING TO GET THE BASIC NECESSITIES FOR THEIR FAMILIES AND KIDS AND THEY MAY NOT BY THEMSELVES THE THINGS THEY USE TO BUY. THE ASPIRATIONAL SHOPPING WE ARE USED TO SEEING IN THE PAST. I THINK THAT TELLS US THAT WITH CREDIT CARD DEBT THE WAY IT IS RIGHT NOW CONSUMERS ARE FEELING ENERGY PRICING, HOUSING PRICING, RENT PRICING PRESSURES ARE PUTTING MORE PRESSURE ON DISCRETIONARY SPEND. RIGHT NOW WALMART AND COSTCO ARE DOING A GREAT JOB OF GETTING THAT CUSTOMER, BUT I THINK ASPIRATIONAL RETAILER, THEY WILL BE FEELING THAT PAIN IN BACK-TO-SCHOOL SHOPPING. I THINK THEY WILL GET THAT BACK DURING THE HOLIDAYS. ROMAINE: WE ARE GOING TO BE HEARING FROM A COUPLE OF THOSE COMPANIES. WALMART AND TARGET REPORT NEXT WEEK. WE TALK DOWN THING, THERE'S A LINE OF QUESTIONS AS TO WHETHER THIS MIGHT BE A LITTLE MORE STRUCTURAL RATHER THAN JUST, OK, YOU KNOW, PEOPLE ARE TIGHTENING THEIR BELTS, AND THEY ARE LOOKING TO SAVE A LITTLE BIT OF MONEY. ARE YOU SEEING A LONGER TERM TREND OF VALUE BY THE CONSUMER IN THE RETAIL SPACE, THAT THAT IS STICKY? NAVEEN: YEAH. I THINK THAT SHIFTS TOWARD KIND OF DAILY VALUE SHOPPING. THAT GOT INTERESTED TO OUR ECONOMY IN 2008, 2009, AND 2010. CONSUMERS TODAY ARE SMART. THEY KNOW WHAT THEY WANT, WHERE THEY WANT TO GET IT. ON AN AVERAGE DAILY BASIS, THEY WILL GO TO THE BEST PLACE TO GET THE BEST FOR THEIR DOLLAR. NOW THEY WANT MORE IN THEIR BASKET FOR THE SAME DOLLAR SPENT. YOU ARE RIGHT, REMAIN, WE ARE SEEING -- ROMAINE, ACTIONS OF GETTING THE MOST FOR YOUR DOLLAR. WHAT DO I GET THE MOST WHEN I GO SHOPPING, WHETHER THE GROCERY STORE OR THE DEPARTMENT STORE? I'M GOING TO MAKE THAT $100 GO AS FAR AS POSSIBLE. ROMAINE: TALK TO ME ABOUT THE OTHER SIDE OF THIS EQUATION, LANDLORDS OUT THERE RIGHT NOW. I KNOW WE'VE TALKED IN THE PAST ABOUT THE SHOW, SOME OF THE SUPPLY CONSTRAINTS ACTING AS A TAILWIND HERE. IS THE SET OF STILL GOING FORWARD OVER THE NEXT TWO YEARS? IS THAT STILL RELATIVELY FAVORABLE? NAVEEN: YEAH. I BELIEVE THAT OTHER THAN A FEW MARKETS WE SEE CONSTRUCTION GOING UP DUE TO DEMAND AND THE LABOR IS AVAILABLE, TEXAS, FLORIDA, GEORGIA IN PARTICULAR, WE WILL NOT SEE THE KIND OF CONSTRUCTION WE NEED TO MEET THE DEMAND AT AN INTERNATIONAL LEVEL. SO 2004 COME UP TO 2015, 2016, 2017, WE WILL LIKELY SEE RENT GOING UP. THESE VERY BEST PROPERTIES ARE GOING TO CONTINUE TO SEE BRENT RISES. WE HAVE NO BETTER EXAMPLE OF THAT THAN WHAT WE SAW BED, BATH & BEYOND CLOSE A COUPLE OF YEARS AGO. THE AVERAGE OWNER SAID HIS RENT ON THAT SPACE, THAT PRIMARY SPACE, DOUBLED WHEN YOU TOOK BED, BATH & BEYOND TO GET TO ANOTHER RETAILER. THAT IS A POSITIVE SIGN FOR OWNERS IN 2027 AND 2028. ISABELLE: I'M GLAD YOU BROUGHT UP RENT, BECAUSE THEY ARE RISING, AND GROWTH IS SLOWING. IS THAT NORMALIZATION, OR IS THAT A SIGN THAT RETAILERS MAY GETTING A CEILING? NAVEEN: I WOULD NOT SAY RETAILERS ARE HITTING A CEILING. RETAILERS ARE CONTINUING TO GROW. THEY ARE BEING BETTER AND SMARTER ABOUT THE INVENTORY OF THEIR STORES. WE TALKED ABOUT AI THE LAST COUPLE OF YEARS, ESPECIALLY THE LAST SIX MONTHS. EVEN RETAILERS ARE USING REAL DATA AS A WAY TO DRIVE STORE I INVENTORY TO MATCH WHAT CONSUMERS NEED, NOT JUST DEPTH OF INVENTORY BUT THE BREADTH OF INVENTORY AND THE QUALITY. RESEARCHERS KNOW WHAT CONSUMERS WANT, AND THEY ARE BEING SMARTER TO GIVE IT TO THEM WHERE THEY WANT IT. ROMAINE: ALWAYS A PLEASURE, NAVEEN JAGGI, PRESIDENT OF AMERICA'S RETAIL BROKERAGE AT JLL. TAPESTRY HAVING THEIR WORST DAY IN A YEAR. WAS IT A BAD EARNINGS REPORT? WE WILL CATCH UP WITH AN ANALYST WHEN WE COME BACK AFTER THE BREAK. THIS IS BLOOMBERG. ROMAINE: TIME NOW FOR OUR TOP CALLS, BIG MOVERS ON THE BACK OF ANALYST RECOMMENDATIONS. WE START OFF WITH VAIL RESORTS, A SELL RATING, A 132 PRICE TARGET. THE MEMBERSHIP HAS ALREADY CAPTURED A SIGNIFICANT PORTION OF THE BASE, AND PRICING POWER STARTING TO HIT THIS YEAR, DOWN 1% ON THE DAY. NEXT UP, BANK OF AMERICA DOWNGRADING STUBHUB, THE FIRM SLASHING ITS PRICE TARGET TO 7.50, THOSE SHARES HAVING THEIR WORST DAY SINCE FEBRUARY. AND JEFFRIES UPGRADING THE DISCOUNT RETAILER FIVE BELOW TO BUY FROM A TREND DRIVEN RETAILER TO A DURABLE GOODS STORE? THE SHARES TODAY RIGHT NOW AT 243, BUT AT ONE POINT TRADED ABOVE THEIR 248 ALL-TIME HIGH. THOSE ARE SOME OF OUR TOP CALLS. WE WANT TO STAY IN THE RETAIL SPACE AND CHECK OUT A STOP GOING IN THE OPPOSITE DIRECTION. TAPESTRY DOWN THE MOST IN A YEAR. THIS AFTER THE MAKER OF COATS BORDERED A FULL-YEAR FORECAST THAT DID MISS ANALYSTS' ESTIMATES. ADRIENNE YIH OF BARCLAYS CAPITAL JOINS US NOW. SHE'S OVERWEIGHT. IF WE DON'T SEE THE NUMBERS. THE GROWTH WAS THERE. IT WAS PHENOMENAL. DOUBLE DIGIT GROWTH. STILL A STORY ALMOST ENTIRELY ABOUT COACH RATHER THAN KATE SPADE. THERE WAS GROWTH ON THE BOTTOM LINE. WITH THE GUIDANCE GOING FORWARD AND SEEMS TO SUGGEST A DECELERATION. IS THAT WHAT THE MARKET IS REACTING TO? ADRIENNE: THAT IS EXACTLY WITH THE MARKET IS REACTING TO. AND REMEMBER, THEY HAD A VERY ARE YEAR END AND HAD TO GIVE FY 27 GUIDANCE. THEY JUST HAD AN ANALYST DAY BACK IN SEPTEMBER, SO NOT LONG AGO. OVER THE COURSE OF THE PAST, YOU KNOW, FOUR, FIVE QUARTERS, THE COMPANY HAS EFFECTIVELY MADE THEIR THREE YEAR LONG-RANGE PLAN IN THE FIRST, YOU KNOW, 15 MONTHS OF THAT THREE-YEAR PLAN. WE TALKED ABOUT RETAIL POLE VAULTING, WHICH IS BASICALLY THE BETTER A COMPANY DOES, THE HIGHER WE RAISE THE BAR FOR THEM. AND I THINK YOU REALLY HAVE TO BELIEVE AT THIS LEVEL, THAT FROM THIS LEVEL, TAPESTRY IS GOING ON TO 25% OPERATING MARGINS, RIGHT? WHERE THEY ARE SITTING AT 22% TODAY. SO WE BELIEVE THAT IS THE CASE, BUT EVERY ONCE IN A WHILE, YOU START TO CONSOLIDATE. SO WE ARE VERY MUCH IN A MOMENTUM STOCK, YOU KNOW, ENVIRONMENT, FOR THE FAST, CALL IT THREE QUARTERS. THESE TYPES OF DATA POINTS, AGAIN, IT'S THE GUIDE SHOWING THE DECELERATION. ROMAINE: LET'S GO THROUGH THE NUMBERS. WE TALK ABOUT THE 25% OPERATING MARGIN. YOU LOOK AT THE MARKET, AND IT ALL LOOKS FAVORABLE, BUT THERE'S A TREND HERE, AND WE TALKED ABOUT THE RESURGENCE OF COACH, AND THEY ARE COMING OFF THESE QUARTERS OF PHENOMENAL GROWTH THERE. HOW DO YOU GET THIS GOING IN AN INDUSTRY THAT CAN BE VERY FICKLE WHEN IT COMES TO FASHION TRENDS? ADRIENNE: YEAH. THAT IS THE KEY NUMBER, RIGHT? YOU CAN LOOK AT MARGINS, ALL THE DIFFERENT OPERATING MARGINS. THOSE ARE OUTPUTS, BUT WHAT THE COMPANY PUTS INCOME AND THE INPUT FOR ANY RETAILER, FRANKLY, IS A CUSTOMER ACQUISITION, RIGHT? THE LIFEBLOOD IS FUTURE GROWTH, FUTURE SALES, FUTURE DEMAND IS WHAT YOU ARE DOING TODAY TO BRING THOSE CUSTOMERS INTO THE CORRAL, RIGHT? I WANT TO GET PEOPLE NUMBERS. IN THE PAST QUARTER, YEAR ON YEAR, THEY ACQUIRED 2.5 MILLION NEW CUSTOMERS. ONE-THIRD OF THEM WERE IN THAT GEN Z COHORT, AND OVER THE PAST YEAR, THEY HAVE ACQUIRED 11 MILLION NEW CUSTOMERS IN THAT SAME COHORT. THERE ARE NO OTHER COMPANIES, NOT EVEN RALPH LAUREN, AT THIS POINT TO THIS DAY, ACQUIRING NEW CUSTOMERS AS QUICKLY AS TAPESTRY IS, AS COACH IS. ISABELLE: INDEED, YOU GAVE A COUPLE OF EXAMPLES THEY ARE. TALK TO US ABOUT THE DIVERSIONS OF THE CONSUMER, ESPECIALLY THE YOUNGER CONSUMER, AND WHERE THEY ARE WILLING TO SPEND. IS THIS STORY A COACH-SPECIFIC STORY, OR ARE THEY SPENDING WHERE THEY SEE MORE VALUE? ADRIENNE: SO, THAT IS A VERY INTERESTING QUESTION, BECAUSE WHAT WE ARE SEEING, LOTS OF PRICE RESISTANCE, RIGHT? IT IS ACTUALLY WHERE THEY SEE KIND OF BRAND VALUE. THEY ARE NOT LOOKING FOR DISCOUNTS AT COACH, THEY ARE PULLING BACK PROMOS. THEY ARE ACTUALLY RAISING PRICES AND MIXING IN HIGHER PRODUCT. BUT THE CORE OF THE BUSINESS IS $200 TO $500, THAT SWEET SPOT. WHAT I WOULD SAY HERE, WHAT WE SEE IN KATE SPADE IS THIS LACK OF KIND OF BRAND AUTHORITY, RIGHT? THE KATE SPADE OVER THE PAST DECADE HAS HAD A COUPLE OF REINCARNATIONS. NONE OF THEM HAVE BEEN VERY SUCCESSFUL, AND I THINK REALLY WHAT YOU SEE WITH COACH, FROM THE STORY WITH TAPESTRY, IF YOU ARE INVESTING IN COACH WITH A CALL OPTION ON KATE SPADE. ROMAINE: A CALL OPTION ON KATE SPADE. IS THAT GOING TO BE THE SAME PLAYBOOK THEY WILL PLAY WITH REGARD TO GETTING COACH UP THERE, OR DOES IT NEED TO BE MATERIALLY DIFFERENT? ADRIENNE: SO, IT IS THE SAME PLAYBOOK, WHICH IS TO PULL BACK ON INVENTORY, IMPROVE YOUR POINTS OF DISTRIBUTION, FOCUS ON R&D, AND THEN THE KEY HERE IS THAT THEY TAKE IN MARKETING DOLLARS, AND THEY ACTUALLY USE DATA. THEY HAVE ONE OF THE GREATEST IN ANY OF THE RETAILERS OUT THERE, TOMORROW IS A BIG AI PRESENTATION. SO THEY ARE REALLY FOCUSED ON -- AND I THINK A LOT OF TIMES, WE UNDERESTIMATE AND FORGET HOW MUCH IS CREATED, BUT THERE'S A VERY DATA-DRIVEN PART TO THIS. SO THEY ARE DOING THE SAME THING WITH LOOKING AT RETURNS ON AD SPEND, AND IT WILL TAKE TIME. HISTORICALLY, COACH HAS JUST BEEN A STRONGER, LONGER, YOU KNOW, BRAND. IT HAS BEEN AROUND FOR 85 YEARS. I DO THINK KATE WILL TURN. I THINK IT WILL TAKE LONGER. ROMAINE: THANK YOU. ADRIENNE YIH, SENIOR ANALYST OVER AT BARCLAYS. COMING UP, WILL TALK ABOUT THE BLOCKBUSTER DEAL WE LEARNED ABOUT YESTERDAY FOR THE LOS ANGELES LAKERS NBA TEAM. FORMER DISNEY CEO BOB IGER TEAMING UP. WE WILL TALK WITH BARBIE CHARMER -- BOBBY SHARMA, FOUNDER AND MANAGING PARTNER OF BLUESTONE COME AFTER THE BREAK. ROMAINE: 3:30 P.M. IN NEW YORK AND THIS IS THE COUNTDOWN TO THE CLOSE. I WAS KEEPING AN EYE ON SOME OF THE FEW PUBLICLY TRADED SPORTS RELATED STOCKS LIKE MADISON SQUARE GARDEN, THE ATLANTA BRAVES HAVE A PUBLICLY TRADED STOCK AS WELL. THIS IS ON THE BACK OF THE NEWS THAT BROKE OF THE LOS ANGELES LAKERS OUT THERE BEING SOLD FOR $12 BILLION, A RECORD FOR A U.S.-BORN'S FRANCHISE. ISABELLE: WHAT STRUCK ME THE MOST WITH THE LACK OF BANKERS. BANKERS ARE USUALLY CREW SHIRT -- CRUCIAL TO A DEAL. MAYBE WE WILL LOSE OUR JOBS ONE DAY AND BANKERS WILL LOSE THEIR JOBS ONE DAY. ROMAINE: OUR NEXT GUEST HAS A LOT TO SAY ABOUT THIS AND KNOWS A LOT ABOUT THIS AND HE SAYS THIS NEXT DEAL SPEAKS TO THE INSTITUTIONALIZATION OF SPORTS AS AN ASSET CLASS AND THE SCARCITY PREMIUM BEING PLACED ON THESE BIG TEAMS. HE SPENT A DECADE WITH THE NBA DEVELOPMENT LEAGUE. NOW HE HAS HIS OWN FUND. BOBBY SHARMA JOINS US NOW. INVESTMENT IN SPORTS BUT NOT TAKING STAKES IN TEAMS. BOBBY: WE LOOK AT TEAMS. ROMAINE: WOULD YOU HAVE BOUGHT INTO THE LAKERS? BOBBY: I THINK THERE ARE PROBABLY TWO STORIES -- ONE IS THE PRICE WHICH IS AN EXTRAORDINARY VALUATION THAT $12.5 BILLION AND THE OTHER IS THE INSTITUTIONALIZATION OF SPORT. THE LAKERS THEMSELVES ARE A SPECIAL ASSET WITHIN THAT ECOSYSTEM. I HAD THE GOOD FORTUNE OF WORKING CLOSELY WITH THEM WHEN THEY WERE THE FIRST NBA TEAM TO PURCHASE AN NBA DEVELOPMENT TEAM MINOR-LEAGUE TEAM. THEY HAVE LONG STOPPED JUST BEING A BASKETBALL TEAM. THEY HAVE LONG STOPPED JUST BEING A COMMUNITY ASSET. IT IS AN EXTRAORDINARY LADY VALUABLE -- EXTRAORDINARILY VALUABLE IP. THERE IS A SCARCITY FACTOR BUT THAT DOESN'T MOVE PRICE DISCIPLINE. AND A GREAT INVESTMENT DOES NOT NECESSARILY MEAN IT IS A GREAT INVESTMENT AT ANY PRICE. AT THE END OF THE DAY, 12.5 BILLION DOLLARS BEING PUT TO WORK WILL HAVE TO RETURN APPROPRIATE RISK-ADJUSTED RETURN. ROMAINE: WHEN WE TALK ABOUT PRICE DISCOVERY, HOW DO YOU ARRIVE IF THERE WAS NO TRADITIONAL PRICE DISCOVERY, HOW WOULD YOU ARRIVE AT $12 BILLION? IT IS BASICALLY JUST EITHER WHAT THE LAKERS OWNERSHIP DECIDED WHAT IT WAS WORTH OR WHAT JOSHUA KUSHNER AND BOB IGER DECIDED? BOBBY: I DON'T THINK YOU CAN ANSWER THE QUESTION WITHOUT KNOWING THE UNDERWRITING OF THE BUYER. WITHOUT KNOWING THE UNDERWRITING FOR KNOWING THE TIME HORIZON, IT IS HARD TO SAY BUT ULTIMATELY, AS I SAID, THE INVESTMENT -- AS YOU SAID, ACTUALLY, THERE IS PRICE DISCOVERY GOING ON HERE AND THAT IS DISTINCT FROM VALUE CREATION SO I WOULD NOT IMPUTE A 20 5% PREMIUM ON EVERY NBA TEAM. IF ANYTHING I THINK THERE MAY BE MORE PRICE THIS VERSION WITH A TRULY ELITE, GLOBAL IP TEAMS COMMANDING A PREMIUM WHEREAS OTHER TEAM STILL HAVE TO JUSTIFY THEIR ECONOMICS. ROMAINE: YOU TALK ABOUT THE GLOBAL IP AND HOW THIS IS MORE THAN A COMMUNITY ASSET. YOU CAN SAY THAT ABOUT A LOT OF TEAMS AND A GUEST AT THE IDEA THAT WITH THIS INSTITUTIONALIZATION OF SPORTS AS AN ASSET, ISN'T THAT ALMOST KIND OF NECESSARY IF THIS HAS BECOME MORE THEN A GLOBAL COMMUNITY ASSET? BOBBY: IF YOU LOOK AT THE MULTIPLE EXPANSION AMONG SPORTS TEAMS BEING SOLD, THE NBA AND WNBA TEAMS ARE NEARLY TWICE THAT OF MAJOR LEAGUE BASEBALL. MAJOR LEAGUE BASEBALL IS STILL FIGURING OUT THEIR FUNDAMENTAL ECONOMICS AS THEY ARE ABOUT TO ENTER THEIR LABOR NEGOTIATIONS. THAT COULD BE DISRUPTIVE AND SIGNIFICANT ALL TOWARDS THE END OF CREATING AN ECONOMIC SYSTEM THAT MAKES SENSE FOR IT. I THINK THE NBA HAS LONG FIGURED THAT OUT. THEY HAVE HAD LABOR PEACE, JUST A YEAR AGO THEY CONCLUDED A $76 BILLION 11 YEAR MEDIA DEAL. THAT VISIBILITY IS PART OF THE VALUE DRIVING IN TERMS OF THE SCALE OF THESE ASSETS. INCREASING FROM WHERE THE STEINBRENNER'S BOUGHT THE NEW YORK YANKEES TO WHERE WE ARE TODAY. BUT ULTIMATELY, THESE TEAMS TRADE ON THE FUNDAMENTALS APART FROM WHAT I WOULD OFFER TO BE A TRULY ELITE, GLOBALLY AND CULTURALLY RELEVANT IP LIKE THE LAKERS WHERE THERE IS A SCARCITY PREMIUM BEING PUT UNDER THE PRICING. AND WITHOUT KNOWING THE MOTIVATION OR UNDERSTANDING THE UNDERWRITING AND THE BUYER OR BUYERS, I SHOULD SAY. IT IS HARD FOR US TO SPECULATE. ISABELLE: NUANCES A SIDE, I WANT TO GO BACK TO THE PRICE TAG. WHAT HAS TO GO RIGHT FOR THIS TO LOOK CHEAP FIVE OR 10 YEARS FROM NOW OR MAY BE A GOOD DEAL? BOBBY: A 20 OR 30 YEAR HOLD. THAT WOULD BE AN EXAMPLE THAT MIGHT COMMUTE. THERE IS TREMENDOUS OPTIONALITY VALUE. THERE IS TREMENDOUS GROWTH POTENTIAL OVER THAT KIND OF HORIZON. SO IT REALLY JUST DEPENDS ON WHAT THE UNDERWRITING IS FOR THE BUYER. ROMAINE: SO, I STARTED OFF TALKING ABOUT [INDISCERNIBLE] ARE YOU INTERESTED IN ACTUALLY -- WE ARE INSTITUTIONALIZED AND NOW YOU ARE AN INSTITUTION. ARE YOU ACTIVELY LOOKING FOR SOMETHING RIGHT NOW? BOBBY: LAST TIME I WAS HERE -- WE HAVE LOOKED AT 1800 DEALS. WE HAVE TREMENDOUS HIGH QUALITY DEAL FLOW. WE UNDERWRITE TO SPECIFIC RETURNS. AS THE ASSET CLASS, AS THE INDUSTRY OF SPORTS, MEDIA AND ENTERTAINMENT CONTINUES TO GROW AND PROFESSIONALIZE, THAT ECOSYSTEM AROUND IT CONTINUES TO INSTITUTIONALIZE AND PROFESSIONALIZE. WE DON'T COMPETE FOR TROPHY ASSETS. WE DO NOT BID UP PRICING. BUT WHAT WE DO IS WE LOOK FOR BUSINESSES THAT ARE BENEFITING FROM THE SECULAR TAILWINDS. ROMAINE: THEN WHAT ARE YOU LOOKING FOR IN TERMS OF ACTUAL REVENUE METRICS? WE USE THE WORDS "TROPHY METRICS" AND I WANT TO PUSH BACK. SOMEONE THAT MADE THEIR MONEY IN THE INDUSTRY AND BOUGHT A SPORTS TEAM AND NOW WITH ALL THE INSTITUTIONS, SOMEONE IS SITTING THERE WITH A SPREADSHEET OR ITS EQUIVALENT LOOKING AT DISCOUNTED CASH FLOW. YOU ARE LOOKING AT WHAT THE REVENUE STREAMS ARE SO WHAT'S MOST IMPORTANT TO YOU, BUT WOULD PRESENT A GOOD VALUE OPPORTUNITY? BOBBY: BACK TO THE QUESTION ABOUT WHAT HAS TO GO RIGHT, THEY ARE LOCKED IN FOR THEIR REVENUE DRIVER, THE MEDIA DEAL FOR 10 YEARS. THE 12.5 BILLION DOLLAR PRICE WOULD'VE HAD TO PRICE THAT IN. INTERNATIONAL IS A MASSIVE OPPORTUNITY FOR BASKETBALL. I'M SURE THAT IS PART OF THE UNDERWRITE. THAT IS LIKELY. NBA EUROPE, YOURS HEARING A LOT ABOUT -- NBA IS LOOKING TO EXPAND AND CREATE VALUE BY CREATING ASSETS THERE. WE ARE LIVING IN AN INCREASINGLY FOCUSED ON LIVE EXPERIENCES WORLD. IF YOU LOOK AT THE BUYER IS, THAT IS ALMOST AS INTERESTING AS THE PURCHASE PRICE. IN BOB IGER AND JOSH KUSHNER YOU HAVE AN INCREDIBLE AMOUNT OF GLOBALLY RELEVANT IP, ENTERTAINMENT SPORTS TECH MEDIA DISTRIBUTION TECHNOLOGY --. FULL STOP THERE. IN KUSHNER YOU HAVE AN EXTRAORDINARY INVESTOR, LONG-TERM, DURABLE CAPITAL. THE TWO OF THEM TOGETHER PIVOTING FROM WHAT WAS AN MBA EXPANSION OPPORTUNITY THEY WERE LOOKING AT IN IN LOST BAGGAGE -- IN LAS VEGAS TO THIS, THE SCARCITY FACTOR IS ATTRIBUTED TO THE LAKERS HAVING 17 CHAMPIONSHIPS AND BEING RELEVANT ON EVERY CONTINENT ON THE PLANET BUT THEY ARE PIVOTING TO THIS AT THAT KIND OF A PREMIUM AT 25% HEADLINE PREMIUM IS INDICATIVE OF WHERE SPORTS INVESTORS SEE SPORTS AS AN ASSET CLASS HEADED. ROMAINE: ARE YOU FINDING POTENTIAL OPPORTUNITIES OUTSIDE OF THE GIGANTIC MEGA TEAMS? WE HAD KAREN NORTON ON YESTERDAY. SHE PAID INTO AN EXPANSION TEAM AND WAS INVOLVED IN WOMEN'S SOCCER, EXPANSION FRANCHISE. IS OUT MORE OF THE SECONDARY SPORTS, FORGIVE MY PHRASING, IS THAT WHERE THE GROWTH IS? BOBBY: WE AT BLUESTONE TEND TO STEER AWAY FROM THAT AND THE SENSE THAT THERE IS A LOT OF -- APART FROM THE REALLY DURABLE, ESTABLISHED SPORTS PROPERTIES, THERE ARE A LOT OF EMERGING SPORTS PROPERTIES AND VENTURE ORIENTED BUSINESSES IN THAT ECONOMY AS IT INSTITUTIONALIZES AND PROFESSIONALIZE ITS. WHERE WE HAVE A HARD TIME INVESTING IS WHERE THE VALUATIONS TEND TO GET AHEAD OF THE CASH FLOWS. ULTIMATELY, WE ARE NOT SPECULATIVE INVESTORS BUT WE FOCUS ON FUNDAMENTALS LIKE CASH FLOWS. QUANTIFIABLE, FULLY DILIGENCE GROWTH. WE'VE MADE 10 INVESTMENTS IN ABOUT 40 MONTHS REPRESENTING AROUND $350 MILLION IN FUNDING. ROMAINE: BOBBY SHARMA, FOUNDER AND MANAGING PARTNER OVER AT BLUESTONE EQUITY PARTNERS. THIS IS BLOOMBERG. BACK IN A MOMENT. ♪ ROMAINE: OUR STOCK OF THE HOUR IS WORKDAY HAVING ITS BIGGEST INTRADAY JUMP SINCE 2012 ON THE BACK OF A REPORT THAT SILVER LAKE IS IN TALKS TO PURCHASE THE SOFTWARE PROVIDER. WHAT DO WE KNOW ABOUT THIS? THIS IS BASED ON A REUTERS REPORT. >> WE KNOW THERE HAVE BEEN TALKS TO POTENTIALLY TAKE OVER WORKDAY. THIS WOULD BE ONE OF THE LARGEST SOFTWARE BUYOUTS IN HISTORY EVER GOES THROUGH. WHAT WE KNOW FROM PEOPLE FAMILIAR WITH THE MATTER AS REUTERS CITED IS THAT TALKS ARE ONGOING AND THERE IS NO GUARANTEE THERE WILL BE A DEAL. WE HAVE SEEN A SIGNIFICANT JUMP IN THE SHARES. THEY SPIKED BY AS MUCH AS 30%. THEY ARE ON TRACK TO CLOSE AT 17%. WE'VE SEEN SOFTWARE COMPANIES BEHEADED WITH FEW EUROS OF A ARE BEING -- AI HITTING THEIR MODELS. THERE IS HOPE AROUND M&A. ISABELLE: TALK TO US ABOUT THE ONGOING BATTLE BETWEEN SOFTWARE AND HARDWARE. >> WE HAVE SEEN INVESTOR A SELL OFF SOFTWARE BECAUSE OF THE FEAR IS. THEY DON'T KNOW HOW AI WILL BE BENEFICIAL TO THIS INDUSTRY. ON THE WE HAVE SANDISK UP TODAY. THERE IS STRENGTH IN OTHER PARTS OF THE TRADE. THIS IS INTERESTING BECAUSE THERE COULD POTENTIALLY BE MORE M&A AND THE SOFTWARE SPACE. A LOT OF THESE COMPANIES HAVE BEEN BEATEN DOWN, ESPECIALLY THOSE ON THE SMALLER SIDE. IT IS THE PLACE WE WILL BE WATCHING AS THIS CONTINUES TO UNFOLD. ROMAINE: IF YOU BELIEVE IN THE LONG-TERM STORY OF SOFTWARE AND THE EVALUATIONS. GREAT TO HAVE YOU. THE SHARE IS NOW UP 17%. TRACKING SOME OF THE OTHER NAMES IN THE SOFTWARE SPACE. AS WE GET CLOSER TO THE CLOSING BELLS. WE WILL BE BACK IN A SECOND. ♪ ROMAINE: BREAKING NEWS FOR THOSE OF OUR VIEWERS IN NEW YORK CITY, WE JUST ACTUALLY LEARNED THAT THE MAYOR'S TAX CAN PROCEED FOR NOW. AN APPEALS COURT THAT WERE LITERALLY PUTTING A HOLD ON ANOTHER JUDGE'S ORDER THAT ACTUALLY BLOCKED THE PLAN. GOOD NEWS FOR YOU. ISABELLE: I WISH. I WAS GOING TO SAY THAT I HAVE BEEN CHECKING OUT THIS NEWS BECAUSE I DO NOT HAVE A SECOND HOME. AVENUE HAVE A FIRST HOME. WE ARE RENTERS. ROMAINE: THIS HAS STIRRED UP A LOT OF CONTROVERSY IN NEW YORK CITY. IT IS BACK ON. THE LAWYERS ALWAYS DECIDE. ISABELLE: WE ARE SEEING BACK-TO-BACK GAINS IN THE S&P 500. GOING TOWARD A RECORD. THE BIG STORY TODAY IS THE 30 YEAR BONDS. SOLD AT THE HIGHEST RATE IN A CENTURY. I WAS BORN THEN. ROMAINE: RIGHT NOW ON THE 30 YEAR YIELD IN THE SECONDARY MARKET. I AM PRETTY SURE YOU ARE NOT AROUND AS WELL. IT GETS TO THIS IDEA. IT IS A LITTLE BIT OF A HEADACHE FOR THE TREASURY DEPARTMENT. >> I WOULD NOT KNOW IF WE ARE MAKING TOO MUCH OF A BIG DEAL ABOUT IT. IT CONTINUES TO GO. THAT AFFECTS HOW THE GOVERNMENT FUNDS ITSELF. THAT CREATES A REFUNDING RISKS IN THE FUTURE. SO THERE ARE CONSEQUENCES. WHAT WE SAW TODAY IS THERE IS STILL DEMAND FOR A LONG DURATION DEBT. THIS WAS NOT AN A PLUS AUCTION BY ANY STRETCH OF THE IMAGINATION. BUT THERE WAS DEMAND. WHAT I LEARNED TODAY WAS INVESTORS STILL WANT TO U.S. GOVERNMENT DEBT. WHETHER THAT WILL BE A GOOD DECISION ULTIMATELY, WE WILL FIND OUT. IT IS NOT GOOD FOR THE FISCAL POSITION OF THE U.S. ROMAINE: WHAT IS THE MESSAGE IN TOTALITY COMING UP? IT DOES SEEM LIKE THERE IS A LOT OF DISCOMFORT RIGHT NOW ABOUT WHERE WE STAND WITH INFLATION. WHETHER WE WILL BE SUCCESSFUL IN FIGHTING IT. >> I THINK THERE IS A LOT OF CONCERN. I DON'T KNOW IF THERE IS ENOUGH CONCERN YET. THE BIG JOKE AMONG OUR TEAM IS NOT SO MUCH OF A JOKE. IT IS WHAT COMES FIRST, FIVE DOLLAR GASOLINE OR 5% TO 10 YEAR TREASURIES. IT IS A LOT OF RISK. THEY ARE FULLY INTERNALIZED BY THE MARKET. ALL OF THAT WILL CONTINUE TO PRESS INFLATION UPWARD. THAT IS PROBABLY THE WRONG ASSUMPTION GOING FORWARD. 80% OF THE TIME WE WILL FIND A HIGHER RATE. THAT WILL BE DRIVEN BY INFLATION CONCERNS. ISABELLE: YOU SAID THEY ARE A LITTLE COMPLACENT WHEN IT COMES TO THE FED AND INFLATION. EARNINGS ARE GREAT. THE ECONOMY IS DOING FINE. WHY SHOULDN'T PEOPLE BE BULLISH ON EQUITIES? >> WE DON'T MIND STOCKS. WE ARE ACTUALLY OVERWEIGHT EQUITIES THAT ARE MULTI-ASSET PORTFOLIO. WE THINK WE ARE LATER IN THE CYCLE. THAT CAN LAST FOR SOME TIME. WE ARE A LITTLE BIT MORE HESITANT. THE HIGH VALUATION. THAT MAKES THE AREAS OF THE MARKET HYDRATION. THOSE ARE THE AREAS OF THE EQUITY MARKET WHERE WE ARE A LITTLE BIT MORE CAUTIOUS. BUT WE ARE QUITE BULLISH ON THE REST OF THE MARKET. I THINK YOU'LL SEE MORE BROADENING IN U.S. EQUITY MARKETS AS WELL AS GLOBAL EQUITY MARKETS AS EARNINGS GROWTH PROPAGATES ACROSS A WIDER SWATH OF COMPANIES. I WOULD NOT SAY WE ARE NOT CONSTRUCTIVE IN EQUITIES. BUT WE ARE MORE CONSTRUCTIVE ON EQUITIES WHERE EVERYBODY ELSE IS NOT. ISABELLE: HOW VULNERABLE ARE THE BIG AI WINNERS? >> I THINK THEY ARE VERY VULNERABLE. EVERYBODY GOES TO THE FIXED INCOME MARKET. IT IS A LOW DURATION COMPANY. MANY OF THE HIGHER GROWTH COMPANIES LIVE IN THAT AI SPACE. THERE IS A REAL CHANGE IN HOW WE THINK ABOUT THAT. THERE IS NO LACK OF CAPITAL IN ARTIFICIAL INTELLIGENCE. YOU WANT TO BE WHERE CAPITAL IS SCARCE. WHERE IT IS NOT PLENTIFUL AS A INVESTOR. THAT CONCERNS US. ROMAINE: AS WE GET DEEPER INTO THIS YEAR, THERE WAS A LOT OF TALK ABOUT THE OUTPERFORMERS. ISN'T THAT STILL RELATIVELY HELD UP BY A COUPLE OF PERCENTAGE POINTS? THE IDEA THAT THERE WILL BE MORE INTERNATIONAL DIVERSIFICATION. >> I ABSOLUTELY THINK SO. IT IS ABOUT INTERNATIONAL EQUITIES. THINK ABOUT THAT. YOU WANT TO BE WHERE CAPITAL IS SCARCE. HOWEVER IT IS PLENTIFUL. WHILE CENTRAL BANKS ARGUABLY CAN BE EASIER THAN THE INTERNATIONAL MARKETS. THAT IS KIND OF THE TRIFECTA. PARITY IS STRONG VALUATIONS. EASIER LIQUIDITY. ACCELERATED EARNINGS GROWTH. COUPLED WITH A SCARCITY OF CAPITAL. ROMAINE: ALWAYS GREAT TO HAVE YOU. IF HAVE TO LEAVE IT THERE. COUNTING US DOWN TO THE CLOSING BELLS. THE S&P IS CAMPED OUT AROUND THE 7800 LEVEL. IT LOOKS LIKE THAT WILL BE A RECORD HIGH. ISABELLE: IT DEFINITELY WILL BE A RECORD HIGH. A LOT OF RISKY ASSETS. THERE ARE NO SIGNS OF SLOWING DOWN. OPTIMISM REMAINS QUITE FROTHY. ROMAINE: WE WILL GET SOME AFTER THE BELL TODAY. >> THE CLOSING BELL. OUR COMPREHENSIVE CLOSE. IT STARTS RIGHT NOW. ROMAINE: WE ARE A COUPLE OF MINUTES AWAY FROM THE END OF THE TRADING DAY. TAKING YOU THROUGH TO THE CLOSING BELL. WE WELCOME OUR AUDIENCES. I NEVER KNEW WHO WAS GOING TO BE ON IT. >> YOU ARE NOT HERE EVERY DAY. ROMAINE: I FEEL LIKE ONE DAY MIKE BLOOMBERG IS GOING TO POP UP HERE. >> LET'S ASK HIM. LET'S GO. THE S&P 500, WE ARE NOW BELOW 7800. WE COULD SEE A FIRST CLOSE ABOVE 7800. RIGHT NOW IT IS LOOKING TO BE A RECORD. ISABELLE: YES. >> WE HAVE A MINUTE TO GO. I SHOULD NOTE THAT WE ARE NOT EVEN HALFWAY THROUGH THE MONTH. WE ALREADY UP OVER 4%. FOR THIS MONTH ALONE. YOU DON'T CARE? >> HE SOUNDS SO BORED. HELP US OUT. ROMAINE: HELP ME OUT. ISABELLE: WE GOT DATA THIS MORNING THAT SHOWED INFLATION MODERATING. THERE IS STILL ONE MORE TO MONITOR BEFORE THE FED MEETING. SO WE CANNOT BE TOO COMPLACENT. ROMAINE: WE GOT A COUPLE OF BENIGN INFLATION REPORTS. THIS WILL BE A RECORD HIGH. IT DOES NOT MATTER. IT IS A RECORD HIGH. ARE YOU CONFIRMING IT? ROMAINE: I AM 100%. IT IS CLOSING AT A RECORD HIGH. >> YOU HAVE THIS INCREDIBLE MACHINE IN FRONT OF YOU THAT TELLS YOU EVERYTHING. MOST NAMES WERE HIGHER IN TODAY'S SESSION. ISABELLE: LET'S TAKE A LOOK AT THAT. ENERGY IS DOWN. MATERIALS ARE ALSO LOWER. ROMAINE: LET'S TAKE A LOOK AT APPLIED MATERIALS. IT DID BEAT ESTIMATES. THAT IS A SLIGHT BEAT. WE NEED TO DIVE A LITTLE BIT DEEPER. IT LOOKS LIKE WE WILL HAVE PHENOMENAL GROWTH FOR THIS COMPANY. >> THE COMPANY'S PRESIDENT AND CEO SAYS HE IS FURTHER RAISING SEMICONDUCTOR REVENUE EXPECTATIONS FOR THIS YEAR. THEY ARE CONFIDENT THAT THEY WILL GROW FASTER THAN THE MARKET. >> I AM NOT QUITE SURE. FORGIVE ME IF YOU SAY THIS. THIS GETS TO OUTLOOK. INTERESTING TO SEE THE STOCK. >> INVESTORS ARE EXPECTING MORE AND MORE. ROMAINE: I WANT TO GO BACK TO THAT NUMBER. EVERYBODY IS LOOKING AT THE PERCENTAGE GROWTH NUMBER. THAT WILL ALWAYS BE HARD TO SUSTAIN. I'M SURE THEY WILL BE ASKED ABOUT IT ON THE CONFERENCE CALL. >> ABSOLUTELY. THE STOCK NOT AS LOW AS IT WAS. A LOT OF QUESTIONS. >> I THINK THERE WILL BE OTHER QUESTIONS AS WELL. WHAT THE COMPANY WILL SPEND ON INVESTMENT. THAT IS UP THROUGH THE END OF THE DECADE. THE NEXT FEW YEARS. WE WILL KEEP AN EYE ON THIS. THE STOCK HAS BEEN A LITTLE PRESSURE. WESTERN DIGITAL OF MORE THAN 7%. MICRON UP OF MORE THAN 4%. THEY WERE JUMPING TO A SESSION. I WILL HAVE TO CHECK ON THAT. TARGETING THE FOLLOWING. IT GOES ON AND ON. THE ENTIRE SECTOR WE SAW EARLIER. I HAVE TO MENTION WORKDAY. WE SAW THIS ONE MOVING DRAMATICALLY. LET'S GO TO SOME OF THE DECLINERS. THE BIGGEST DECLINE GOING BACK TO EARLIER THIS YEAR. THIS AFTER THE COMPANY PROJECTED 7.5 BILLION DOLLARS IN DATA CENTER SALES. HE SAID HE DID NOT THINK IT WAS THAT. CISCO SHARES FELL TODAY BY 8.4%. HURTS SHARES ARE GETTING CRUSHED. THIS AFTER PERSHING SQUARE'S CHIEF INVESTMENT OFFICER SAID IT SOLD ITS STAKE IN HURTS. THEY LOST CONFIDENT IN MANAGEMENT. THEY SAID THEY DIDN'T THINK IT WAS NECESSARY. THEY HAVE SEEN SOME WILD SWINGS. SOME MOVEMENT. THE CHALLENGE WAS WITH THE WORLD CUP. PEOPLE WERE NOT ACCESSING TICKETS. STUBHUB SAYS IT WAS AN ISSUE WITH FIFA. THERE ARE A LOT OF PEOPLE COMPLAINING ABOUT IT. ROMAINE: OBVIOUSLY STUBHUB TAKING THE BLAME. BASED ON THE REACTION IN THE SHARES TODAY. YIELDS ARE DOWN ACROSS THE BOARD. GIVING INVESTORS A LITTLE BIT OF HOPE FOR MORE OF A BOND RALLY. WE ALSO HAVE THE 30 YEAR AUCTION TODAY. >> SCANDISK IS NOT A RECORD HIGH. I KNEW YOU WOULD COME AT ME IF I DID NOT MENTION THAT. I LIKE TO DO THAT. HERE IS A STORY ON OUR RADAR. MANHATTAN RENTS HITTING $5,000. THAT IS A RECORD. WHILE LISTINGS ALL BUT VANISHED. PEOPLE PAYING $4000 TO GET A PEEK ON LISTINGS. BECAUSE A BROKER FEE ISSUES. IT IS SO COMPETITIVE OUT THERE. THIS IS THE WAY IT WORKS. IT IS SUPPLY AND DEMAND. COMPARED TO LAST YEAR. IT IS EXPENSIVE OUT THERE. ISABELLE: I HAVE A LOT OF THOUGHTS. WE MOVED TO BROOKLYN. WE WERE LOOKING AT AN APARTMENT. WE WERE BEAT BY SOMEONE WHO OFFERED MORE. MAYBE WE ARE IN A DIFFERENT TAX BRACKET. >> MAYBE THAT TAX WILL BOTHER YOU. APPARENTLY IT IS BACK ON. >> THE APPEALS COURT SAID IT IS ON. >> GET YOUR CHECKBOOK OUT. ROMAINE: I AM PUTTING MIND TODAY. I HAD TO WRITE A CHECK TODAY FOR THE FIRST TIME. >> WE HAVE TO RUN. WE HAVE SOMETHING IMPORTANT TO DO ON THE SIDE. THANK YOU VERY MUCH. THAT DOES IT FOR US. THANK YOU. WE WILL BE BACK HERE. ROMAINE: OUR COVERAGE CONTINUES. THIS IS THE CLOSE ON BLOOMBERG. >> THE COUNTDOWN IS ON. EVERYTHING YOU NEED TO GET THE EDGE AT THE END OF THE MARKET DAY. ROMAINE: 12 MINUTES REMOVE FROM THE CLOSING BELLS. THE RUSSELL 2000 ON THE DAY. RECORD HIGHS. THEY TELL OF TWO CITIES IN THE RETAIL AND FASHION SPACE. BIRKENSTOCK SHARES HAVING A PHENOMENAL DAY. A RELATIVELY BULLISH OUTLOOK. A PRETTY GOOD OUTLOOK. RELATIVELY BULLISH. CONCERNS ABOUT THE CLIENTS IN THE GROWTH RATE. HAVING THE WORST DAY IN A OF YEAR. A TALE OF TWO CITIES IN THE CHIP SPACE. THEY GAVE A RELATIVELY DECENT FORECAST. SANDISK, HOW ABOUT THAT? HAVING A DAY HERE IN NEW YORK. THAT BRINGS US TO OUR TOP STORY. THEY WERE USED TO BUILD. THIS STOCK GOT CAUGHT UP IN A BIG WAY. THAT IS UNDENIABLE. THOSE NUMBERS WERE A LITTLE BIT LESS IMPORTANT. WILL THAT BE ENOUGH? TO SHOW STRONG SEQUENTIAL GROWTH? WHETHER THAT IS STILL STRUCTURALLY RAMPING UP RATHER THAN MAYBE PRODUCING ANOTHER CHIP CYCLE. THESE NUMBERS DO NOT LOOK BAD. A LITTLE BIT OF A DOWN MARKET REACTION. WE WERE ON THE EARNINGS CONFERENCE CALL. THE REACTION WAS VERY SIMILAR TO WHAT HAPPENED BACK IN JULY. THERE WERE A COUPLE OF THINGS PLAYING OUT HERE. WHEN YOU THINK ABOUT WHO IS ACTUALLY SPENDING. IT STARTS NEXT YEAR. IT WAS SPENT WITH APPLIED MATERIAL. THE SECOND FACTOR IS WHEN YOU LOOK AT THE CONTACT -- ENTIRE SUPPLY CHAIN. MANY ARE OPERATING AROUND 70%. IT WILL TAKE SOME TIME TO RATIONALIZE HIGHER PRICES. THIS GETS TO THE IDEA, WE SHOULD POINT OUT OBVIOUSLY MOST OF US ARE LOOKING A LOT FURTHER OUT. THEY REPORTED EARNINGS OF THE LAST COUPLE WEEKS. MANY THINK THIS WILL BE LASTING FOR THE NEXT COUPLE OF YEARS. IS THAT YOUR VIEW AS WELL? >> ABSOLUTELY. THE SPENDING IS VOLATILE. THE CAPACITY PART OF THE MEMORY SPENDING IS STARTING TO PLAY OUT. THAT WILL ACCELERATE INTO NEXT YEAR. THERE WILL BE MORE DETAILED COLOR. SPENDING WILL ACCELERATE. ROMAINE: I'M CURIOUS ABOUT THE COMPETITIVE ADVANTAGES THAT IT HAS. IT IS A VERY SPECIALIZED PLAYER. IT COMPETES DIRECTLY WITH OTHERS. >> IT IS A DUOPOLY FOR CERTAIN PARTS OF MANUFACTURING. THAT IS 5% OF AN EQUIVALENT INDUSTRY. THE SIZE OF THE PIE IS INCREASING. SPENDING IS ACCELERATING. ALL OF THESE COMPANIES CLAIM TO HAVE A 100% MARKET SHARE. WHERE THE NUMBERS GO FOR NEXT YEAR IS SOMETHING THAT INVESTORS WILL UPDATE. ROMAINE: WHEN WE TALK ABOUT WHAT YOU WANT TO HEAR ON THE CONFERENCE CALL, THE IDEA OF THE LONG TERM BUSINESS MODEL, IS THERE SOMETHING THEY COULD TELL YOU THAT WOULD GIVE YOU A LITTLE BIT MORE COMFORT? THE GENERAL IDEA OF PRESERVING MARGINS AND MARGIN QUALITY? >> I THINK THE CHINA POLICY OF THE CHINA RISK IS SOMETHING WE HAVE BEEN DEALING WITH FOR A DECADE. IT IS SOMETHING THAT IS NOT NEW. I HAVE BEEN DEALING WITH IS FOR A DECADE. IT IS NOT A FACTOR. POWELL SPENDING WILL EVOLVE. WITHIN MEMORY THERE ARE SEGMENTS. THERE IS ACTUALLY DIVERSIFICATION OF SPENDING. IN THE FOUNDING SPACE. THEY HAVE BEEN VERY SENSITIVE TO THEIR CUSTOMERS. THIS IS SOMETHING THE INDUSTRY HAS TO RETHINK. THEY WILL PROVIDE SOME QUALITATIVE ASSESSMENT. ON ENOUGH THAT WILL BE ENOUGH. INVESTORS HAVE DONE THAT. I THINK IT IS MORE OF A CONFERENCE CALL. THAT THEY WILL BE ABLE TO PROVIDE DETAILS. ROMAINE: WE ALWAYS APPRECIATE IT. THAT CONFERENCE CALL KICKING OFF IN ABOUT 20 MINUTES TIME. SHARES DOWN ABOUT 3% IN THE AFTER HOURS TRADE. COMING UP, WE'RE JUST WRAPPING UP THE BIG RESTAURANT EARNINGS SYSTEM. WE HAD JACK-IN-THE-BOX OVERNIGHT. WE HAVE HEARD FROM OTHERS. A LOT OF CONCERNS. HOW THESE COMPANIES ARE DEALING WITH SOME THE CONCERNS OF CYCLOSPORA AND SALMONELLA. WE WILL SET YOU UP AFTER WE COME BACK FROM THE GREAT. THIS IS BLOOMBERG. ♪ >> I THINK IT IS A LITTLE BIT OF A MISCONCEPTION. WE ARE GREAT FRESH, RAW PRODUCE. BUT WE ALSO SERVE A LOT OF DELICIOUS COOKED FOOD. ROMAINE: THE CEO OF SWEET GREEN SPEAKING WITH US ON THE PROGRAM YESTERDAY. REFLECTING ON THIS CYCLOSPORA OUTBREAK THAT IS TIED TO LET US. SHARES DOWN MORE THAN 30%. OF THE RESTAURANT STOCKS HAVE ALSO GOTTEN HIT BECAUSE OF BROADER FEARS OUT THERE. IT WAS KIND OF AN INTERESTING WEEK. WE WERE GETTING EARNINGS OUT OF THESE COMPANIES. THE VAST MAJORITY OF THEM SEEM TO SUGGEST THAT THE IMPACT ON THEIR FOOT TRAFFIC IN THE PAST QUARTER IS NONEXISTENT. >> IT IS A PLEASURE TO BE ON. IT WAS HIGH SINGLE DIGITS. IN TERMS OF TRAFFIC. HE MENTIONED IT. THE ACCOUNTS ARE BACK UP TO THE MID-SINGLE DIGITS. ACROSS THE BOARD WE HAVE SEEN A BIG IMPACT EARLY ON. I WOULD BE SURPRISED BY THAT. IF IN SEPTEMBER WE ARE STILL TALKING ABOUT AN IMPACT CONTINUING. ROMAINE: WE SAW THAT WAS TACO BELL. THEY SELL TRAFFIC DOWN ABOUT 30%. RIGHT ON THE HEELS OF THE PUBLIC BEING MADE AWARE OF THE CYCLOSPORA OUTBREAK. THEY WERE PRETTY CONFIDENT THAT THAT WAS A TEMPORARY DIP. >> THAT IS RIGHT. THERE WAS A DIRECT IMPACT. IF ANYONE IS GOING TO BE IMPACTED, IT WILL BE TACO BELL. ROMAINE: THAT IS WANING. YOU HAVE TESTED COMPANIES LIKE TACO BELL, REPORTS WERE THAT THE TAYLOR FARMS PROJECT THAT WAS SUSPECT WAS DIRECTLY IN THE SUPPLY CHAIN. NOT NECESSARILY SET OUT WITH SWEETGREEN. THAT IS HOW PEOPLE PERCEIVED IT. SALES GROWTH COULD STILL BE WHAT THEY SAID IT WOULD BE PRIOR TO THIS OUTBREAK. I KNOW THEY HAVE A LOT OF THAT. IT IS STILL TRAFFIC AND FRESH PRODUCE. >> WITH CHIPOTLE AND PANERA, ETC., ACROSS-THE-BOARD WE SAW AN IMPACT. WITH MCDONALD'S AND OTHERS. THE IMPACT WAS CONCENTRATED IN THE MIDWEST. TO A LESSER EXTENT IN THE NORTHEAST. WHERE A LOT OF THE NEWS WAS. RELATIVE TO THE WEST COAST. ACROSS-THE-BOARD THAT IMPACT HAS WANED. ROMAINE: WHAT ABOUT THE SIT-DOWN CHAINS OUT THERE. WE HEARD FROM THE OWNER OF CHILE'S YESTERDAY. WE HAVE EARNINGS OUT OF CHEESECAKE FACTORY AND OTHERS. WAS THERE NO REAL MATERIAL IMPACT ON ANY OF THOSE COMPANIES? >> NO MATERIAL IMPACT. THERE WAS A LITTLE BIT OF A BENEFIT. THOSE TRENDS HAVE ACCELERATED. THEY HAVE ACCELERATED QUITE DRAMATICALLY. THERE MIGHT HAVE BEEN A LITTLE BIT OF A SHIFT. THE ACCELERATION IN DINING PRECEDED THE OUTBREAK. NO IMPACT AT ALL. ROMAINE: WE ONLY HAVE ABOUT 30 SECONDS LEFT. WAS THERE SOME SENSE THAT MOST OF THESE COMPANIES WERE ON THE UPSWING? OR WERE THERE STILL ISSUES WITH THE CONSUMER? >> THEY CONTINUE TO DEAL WITH THE LOWER INCOME CONSUMER. FAST CASUAL WAS ON THE UPSWING. CHIPOTLE HAD A VERY GOOD QUARTER. I THINK THE IMPACT WILL BE SHORT-LIVED. ROMAINE: WHEN WE COME BACK, WE WILL TALK INSURANCE. THIS IS BLOOMBERG. ROMAINE: WALL STREET IS LOOKING FOR NEW WAYS TO KEEP THE PRIVATE MARKETS. AND INCREASE THEIR OWN LIQUIDITY. OUR NEXT GUEST IS SOMEBODY WITH A LOT OF EXPERIENCE IN THAT SPACE. THEY HAVE ABOUT $19 BILLION IN ASSETS UNDER MANAGEMENT. HE IS ALSO THE CHIEF INVESTMENT OFFICER. FOCUSING ON A PORTFOLIO. ABOUT 25% OF YOUR PORTFOLIO RIGHT NOW IS INSURANCE. YOU ARE THE PILLAR OF WHAT SEEMS TO BE AN EFFORT. WHY WHY? >> IT IS VERY SIMPLE. IT'S A DIRECT CORRELATION BETWEEN THE DIVERSIFICATION. ROMAINE: LET'SROMAINE: TALK ABOUT THIS MASH-UP. WE SEE EVERYONE TRYING TO DO THAT. A FEW OF THE OTHER ALTERNATIVE ASSET MANAGERS. THEY ARE CERTAINLY LOOKING. WHAT IS THE DIFFERENCE BETWEEN WHAT YOU ARE DOING AND WHAT APOLLO IS DOING? >> EVERYONE HAS A DIFFERENT APPROACH. WE HAVE BEEN BRINGING IN CAPITAL. THAT IS A VERY LONG TERM HORIZON. THEY ARE VERY GOOD AT WHAT THEY DO. THEY RUN OUT OF TIME. THEY INVEST FOR A FINITE TIME. WHEN YOU HAVE PERMANENT CAPITAL, YOU LOOK AT MULTIPLES OF INVESTED CAPITAL. WE ARE LONG-DURATION INVESTORS. ROMAINE: GIVE ME SOME SENSE OF THE STRUCTURE. I UNDERSTAND THAT YOU ARE TAKING THE ANNUITIES THAT YOU GETTING FROM THE INSURANCE BUSINESS. YOU ARE INVESTING THAT MONEY. IS THAT THE IDEA? THAT FEEDS BACK INTO THE INSURANCE BUSINESS. >> WE HAVE AN ANCHOR INVESTORS. WE LOOK AT DIFFERENT OPPORTUNITIES. THAT HAS ALLOWED US TO BUILD OUT AROUND THREE PILLARS. THE FIRST PILLAR IS ADVISED. THE SECOND PILLAR IS REALLY A ASSET-BACKED LENDING. LOOKING AT COLLATERAL. OVERATE ROMAINE: I HAVE HEARD YOU TALK ABOUT THE FUTURE OF INSURANCE. THERE ARE SOME PEOPLE WHO LOOK AT PRIVATE ASSETS RIGHT NOW AND SAY THERE IS SO MUCH ASSOCIATED WITH THAT THAT WOULD NOT HAVE BEEN ASSOCIATED WITH TRADITIONAL GOVERNMENT BONDS AND OTHER TRAFFIC. WHAT IS THE RISK-ADJUSTED PROPOSITION FOR BEING MORE INVESTED IN ALTERNATIVES? >> I'M GLAD YOU ASKED ME THAT QUESTION. YOU ALWAYS HAVE TO LOOK AT RETURN BY UNIT OF RISK. THIS HAS RESULTED IN UNDERWRITING AND LIQUIDITY. AND COMPLEXITY. WHEN YOU LOOK AT THOSE RETURNS IN PRIVATE MARKETS, IT IS A $40 TRILLION MARKET. A VERY BIG MARKET. IT IS A LEVERAGED FINANCE. MIDDLE-MARKET SPONSORED LENDING. WE ARE NEGATIVE ON SPONSORED LENDING IN THE MIDDLE-MARKET. BECAUSE THE WORLD DOES NOT NEED ANOTHER MANAGER JUMPING IN. WHEN YOU LOOK AT WORKING CAPITAL FINANCE AND SUPPLY CHAIN FINANCE, ANYTHING THAT IS ASSET-BACKED AND CAN BE STRUCTURED WEALTH, YOU HAVE TO LOOK AT THE SOURCE. THEY'RE NOT THAT MANY PUBLIC COMPANIES OUT THERE. INVESTMENT-GRADE CREDIT IS WHERE YOU ARE BUYING UNSECURED ASSETS RIGHT NOW. WE ARE NEGATIVE ON INVESTMENT-GRADE PORTFOLIOS AS WELL. THAT CAN BE STRUCTURED. IT CAN BE BOUGHT AT THE RIGHT PRICE. AND THEN YOU FOCUS ON THE DOWNSIDE. NOT JUST HOPING FOR AN UPSIDE. INSURANCE IS ABOUT MANAGING COMPLEXITY OF RISK. ROMAINE: IT IS. ARE YOUR INVESTMENT PRACTICES MATCHING UP WITH WHAT I ASSUME IS THE RELATIVELY CONSERVATIVE UNDERWRITING STANDARDS? >> WHAT HAS HAPPENED WITH THE ENTRANCE OF MANAGERS INTO THE SPACE, THE COST OF FUNDING, THE COST OF LIABILITIES HAS GONE UP. NOW YOU CANNOT JUST INVEST IN BORING PUBLIC FIXED INCOME. YOU HAVE TO INVEST IN POCKETS OF PUBLIC MARKETS. YOU STRUCTURED AND. YOU DO SURVEILLANCE ON THEM. A BIG RISK IN THIS MARKET AS THERE IS NO PRICE VALIDATION. UNLESS YOU ARE SIGNIFICANT TO OTHERS. EVERYBODY CAN MAKE THEIR OWN RISK. BUT THERE IS NO VALIDATION. ROMAINE: I WANT TO TALK ABOUT SOME OF YOUR PENDING ACQUISITIONS. >> WE ARE WORKING TOWARD THAT. OUR PLAN IS TO CLOSE IN THE SECOND HALF OF THE YEAR. WE ARE LOOKING TO CLOSE THAT. THAT IS IMMINENT. ROMAINE: IN REGARDS TO WHAT YOU WOULD BE INTERESTED IN BUYING MOVING FORWARD, WOULD YOU ACTUALLY BUY OUTRIGHT PUBLIC LIFE INSURANCE? >> PROBABLY NOT. WE HAVE A REALLY GOOD PLATFORM. WE HAVE PROSPERITY IN THE U.S. IN THE RETAIL MARKET. WE THINK THERE IS A RETIREMENT CRISIS IN AMERICA. THERE NEEDS TO BE A SOLUTION. WE HAVE TALKED ABOUT THE AUSTRALIAN MODEL WHICH WE ARE HIGHLY SUPPORTIVE OF. THIS IS VERY INTERESTING TO US. WE ARE AN INSURER FOR OTHER INSURANCES THROUGH REINSURANCE. WE WILL BE BUILDING OUT THAT PRACTICE. WE HAVE THE CAPITAL AND THE WHEREWITHAL. TO BE A BACKSTOP TO PUBLIC INSURANCE. INSURANCE IS A BUSINESS THAT SHOULD NOT BE VERY PUBLIC. ROMAINE: WHAT ABOUT A PRIVATE CREDIT ARMED? IS THAT SOMETHING THAT YOU'RE CONSIDERING? DO YOU NEED IT? >> WE HAVE POCKETS OF CREDIT THAT WE LIKE. WE SPECIALIZE IN REAL ESTATE. ACROSS THE BOARD. THERE ARE OTHER PART OF THE SECTORS THAT WE LIKE. WE ARE NOT SPONSORED BACK TO PRIVATE CREDIT. THAT IS SIDESTEPPING THAT PART OF THE MARKET. WE ARE TALKING ABOUT THE AI BOOM. PARTS OF IT HAVE A BINARY RISK. WE HAVE TO RETURN CAPITAL BACK TO POLICYHOLDERS. FOR FAMILY OFFICES OVER TIME. THEY NEED AN OFF-BALANCE SHEET FINANCIALLY. THE STRUCTURES AROUND THAT, HOW TO STRUCTURE THAT IN A MANNER THAT IS NOT WINNER TAKE ALL. THAT IS HOW WE DO SUPPLY CHAIN. ROMAINE: THERE ARE INSURERS THAT ARE PLAYING IN THE SPACE. BUT IS THERE AN INSURABLE BUSINESS MODEL? FOR THE AI INFRASTRUCTURE BUILD OUT? OR IS THERE JUST THAT POTENTIAL RISK? >> TAKING A BINARY RISK, THAT IS A DEVELOPMENT RISK. YOU CAN HAVE WINNER TAKE ALL IN THIS MARKET. A SCENARIO WHERE A HYPERSCALER CAN PICK WINNERS AND LOSERS IS NOT SOMETHING WE WANT TO UNDERWRITE. WE WANT TO UNDERWRITE WHERE WE HAVE CERTAINTY TO CASH FLOW. LOOKING AT HOW QUICKLY WE CAN GET OUT OF THE RISK POSITION. ROMAINE: I HAVE TO ASK YOU ABOUT THAT. YOU BUILT IT UP AND YOU SOLD IT. NOW I SEE YOU DOING THIS AGAIN. OBVIOUSLY A LITTLE BIT DIFFERENT. BUT IT RAISES A LOT OF QUESTIONS ON WHETHER THIS MATCHUP OF MANAGERS AND INSURERS HAS REACHED THE SEVENTH DEGREE OF MATURITY. HOW MUCH LIFE IS LEFT IN THIS MODEL? HAVE WE SEEN THE BEST THAT IT HAS TO OFFER? >> FOCUSING ON BIGGER IS BETTER DOES NOT WORK IN MY HUMBLE VIEW. THIS IS A STABLE FORM OF FINANCING. ALONG WITH EQUITY. THAT MODEL HAS A LOT OF LEGS TO GO. BECAUSE YOU HAVE AN ALIGNMENT BETWEEN THE PROMISE AND THE CAPITAL. WHICH IS 30 YEAR CAPITAL. A LOT OF MANAGERS DO NOT HAVE 30 YEAR CAPITAL. THAT MODEL IS LIFE INSURANCE 3.0. ROMAINE: THIS IS A FASCINATING CONVERSATION. WE WILL HAVE TO GET YOU BACK TO TALK MORE ABOUT THIS. WE WANTED TO BRING TO YOUR ATTENTION A REDHEAD CROSSING THE WIRE. THIS ON THE U.S. CREDIT RATING. BEING CONFIRMED. JUST NOW CROSSING THE BLOOMBERG TERMINAL. WE WILL TAKE A QUICK BREAK AND RESET HERE. TAKE A QUICK LOOK AT WHAT IS HAPPENING IN THE POST-MARKET TRADE. THAT CONFERENCE CALL IS NOW UNDERWAY. COMING OFF A RECORD DAY TODAY FOR THE S&P AND THE RUSSELL 2000. ROMAINE: IPO'D'S IN THE CONSUMER SPACE PICKING UP ESPECIALLY AFTER THE TRADING DEBUTS THAT WE SAW OF JERSEY MIKE'S AND REFORMATION A COUPLE WEEKS AGO. WHAT COULD BE THE NEXT BIG BRAND TO GO PUBLIC? THERE ARE OTHERS. THEY SAY THEY ARE BETTER FOR YOU CONSUMER BRANDS. IF THOSE CAN REMAIN RESILIENT. HE IS A MANAGING PARTNER. GREAT TO HAVE YOU. WHEN I LOOK AT YOUR LINEUP OF BRANDS, THE VAST MAJORITY OF THESE WE HAVE SEEN ON THE SHELVES AT SOME POINT OR ANOTHER. I WAS ALWAYS TOLD THAT VENTURE CAPITAL WAS NOT INTERESTED IN THESE BRANDS. WHAT WE KNOW IS JUST AS HYPERCOMPETITIVE ENVIRONMENT. >> I THINK THAT IS TRUE. THANK YOU FOR HAVING ME. ALL OF THAT IS TRUE. THE ONE THING I WILL SAY IT IS THE WAY THAT WE ACTUALLY INVEST AND CONSUME IS DIFFERENT. WE ARE LOOKING AT BUSINESSES THAT ALREADY HAVE REVENUE. THERE IS A CONSUMER THAT IS A VERY PASSIONATE ABOUT THAT PARTICULAR BRAND. WHAT MAY END UP LOOKING LIKE SOMETHING THAT IS A DARK ART OF PICKING A CODE BRAND, THERE IS A LOT OF DATA WE ARE ABLE TO GET IT. IN TERMS OF SELLTHROUGH. ANT FINANCIAL HEALTH. WHAT IS GOING ON WITH SOCIAL MEDIA. THEY POINT US IN THE RIGHT DIRECTION. THAT REALLY CONFIRMS OUR BELIEF WITH THESE PARTICULAR BUSINESSES. ROMAINE: GIVE ME A SENSE OF WHAT YOU'RE TALKING ABOUT IN REGARDS TO DATA. I ASSUME YOU'RE TRYING TO TAP INTO CERTAIN TRENDS THAT YOU THINK WILL BE SUSTAINABLE. >> ABSOLUTELY. IT REALLY IS A CONSISTENT THEME THAT WE HAVE SEEN OVER THESE PAST YEARS. CONSUMERS ARE MORE AND MORE FOCUSED ON INVESTING IN THEMSELVES. THIS POCKET OF INVESTING THAT WE HAVE REALLY FOCUSED ON IS MORE FOCUSED ON MODERN STAPLES. AN ECONOMIST MIGHT NOT THINK OF THEM IS STAPLES. AS YOU THINK ABOUT IT IS THAT THINGS HE PUT IN YOUR BODY, ON YOUR BODY, AROUND YOUR BODY. THESE ARE THE THINGS YOU WANT TO INVEST BEHIND. LIKE KIND BARS. FOR WATER THAT IS BETTER FOR YOU. IT COULD BE A PILATES CONCEPT. FEW PEOPLE ARE WILLING TO GO AND PAY A LITTLE EXTRA. WHEN IT COMES TO INVESTING IN YOUR FAMILIES. ROMAINE: ALSO WE TALK ABOUT THE BODY AS WELL. I HAVE A COLLEAGUE WHO ALWAYS SAYS INVEST IN YOUR FACE. SHE WAS SERIOUS. WE HAD THE SUPERGROUP FOUND HER ON A COUPLE OF YEARS AGO. WHEN I THINK $70 MILLION FOR A SUNSCREEN BRAND, WHAT IS THAT ACTUALLY TELLING US ABOUT THE BREAKOUT CONSUMER BRAND AND WHAT IT CAN REALLY BE. >> I THINK WHAT ENDS UP HAPPENING IS THERE IS A GOOD AMOUNT OF PATTERN RECOGNITION. THAT IS SOMETHING WE INVESTED IN. WE INVESTED IN ANOTHER BRAND. I DON'T KNOW IF YOU'RE FAMILIAR WITH THAT ONE. THAT WAS REALLY BUILT OFF OF A LOT OF TONGUE-IN-CHEEK HUMOR. THERE WAS A LOT OF INVESTMENT IN THAT BUSINESS. WE ALWAYS KNEW THAT THE CONSUMER THESE DAYS IS WORRIED ABOUT SUN PROTECTION. THAT IS SOMETHING THAT IS REALLY PERVASIVE. IT COULD BE FOR YOURSELF OR YOUR KIDS. YOU ARE JUST TRYING TO DO BETTER. WE SELL THIS A COUPLE OF YEARS AGO. MOST OF THE TIMES OF BUSINESSES, ESPECIALLY THE PRODUCT ORIENTED BRANDS WE ARE INVESTING IN, WE ARE BUILDING THEM FOR A STRATEGIC ACCIDENT. THAT IS OUR PRIMARY AREA OF FOCUS. ROMAINE: LET'S TALK ABOUT THAT. OBVIOUSLY THE IDEA IS TO SELL IT. THOSE COMPANIES ARE ALL RUNNING THEIR OWN VENTURE ARMS. IS THAT YOUR ACCENT OR YOUR COMPETITORS? >> THAT IS A GOOD QUESTION. IT ENDS UP BEING PRETTY SYMBIOTIC. WHAT ENDS UP HAPPENING IS WHEN WE SEE THIS GOING IN WAVES, MOST OF THE TIME WHEN YOU HAVE A GREAT ENTREPRENEUR OR FOUNDER THEY ARE PUTTING SOMETHING INTO THE WORLD THAT THEY FEEL IS A GOOD BUSINESS IDEA OR THEY ARE TRYING TO SOLVE THEIR OWN PERSONAL NEED. THAT IS USUALLY SOMETHING THAT IS NOT HYPER ENGINEERED FOR EXIT. THAT IS REALLY WHERE WE COME IN. WE SEE THERE IS A GREAT MARKET FOR IT. THERE IS A REAL INTEREST FROM A STRATEGIC PERSPECTIVE. WE DON'T HAVE SOMETHING THAT FITS INTO OUR PORTFOLIO. WE START TO BUILD BACKWARDS. WE BUILD THIS BUSINESS FOR STRATEGIC'S. THE VENTURING ARMS ARE HELPFUL. THEY ARE SOMETIMES A CONDUIT FOR LEADING THE STRATEGIC'S KNOW WHAT IS UP-AND-COMING. SOMETIMES THEY ARE INVOLVED WITH THE BUSINESSES WE ARE INVESTED IN AND SOMETIMES THEY ARE NOT. MORE THAN ANYTHING ELSE THEY ARE EDUCATING THE STRATEGIC'S ON WHAT IS UP-AND-COMING. ROMAINE: OBVIOUSLY THE STRATEGIC SIDE IS BIG AND STRATEGY. IS THERE DEMAND? THAT IS A LITTLE BIT OUTSIDE THE REALM OF WHAT YOU DO. I AM CURIOUS IF THERE IS APPETITE IN THE IPO MARKET FOR CONSUMER BRANDS OVERALL. >> WE KEEP AN EYE ON IT. YOU MENTIONED A COUPLE THAT ARE HAPPENING THIS YEAR. THEY WILL NOT BE AS HIGH. AS SOME OTHER CATEGORIES. WE SPEND MORE TIME IN THE M&A MARKET. MUCH MORE OF A FOCUS ON WHAT A STRATEGIC IS LOOKING FOR. WHAT I SPONSORS ARE LOOKING FOR AS WELL. ROMAINE: I WANT TO ASK ABOUT WHAT YOU ARE SEEING OVERALL. WE TALKED IN THE SHOW ABOUT CONSUMER TRENDS AND DATA BEING IN THE SELECTION PROCESS. I ASSUME YOU HAVE TO BE SITTING ON SOME DATA ACROSS YOUR FOOD AND BEVERAGE AND BEAUTY PRODUCTS. WHAT ARE YOU SEEING RIGHT NOW WHEN IT COMES TO BUYING PATTERNS? >> THAT IS A GREAT QUESTION. I THOUGHT A LOT HAS BEEN MADE OF THAT. THERE HAS ALWAYS BEEN A BIG DISCONNECT. WE ALWAYS TALK ABOUT THAT. THAT'S WHERE THEY WANT TO PUT THEIR MONEY. THAT IS AN AREA THEY ARE WILLING TO SPEND IN. IT IS EASIER TO CONVINCE THEMSELVES. WE HAVE NOT SEEN A SLOWDOWN IN THOSE CATEGORIES. I COULD SEE BIGGER TICKET ITEMS LIKE MAYBE LUXURY ITEMS, THINGS THAT ARE TRULY ONE TIME IN NATURE. AT SOME POINT THERE WILL BE A LITTLE BIT MORE OF A SLOWDOWN. A LOT HAS BEEN MADE OF QUOTE IS GOING ON IN LUXURY. FOOD AND BEVERAGE AND BEAUTY CARE IN THE PET SPACE ARE WE CONCENTRATE ON. THEY HAVE ACTUALLY OUTPERFORMED INCREDIBLY WELL. ROMAINE: YOU SEEM MORE INTERESTED IN THE SPACE OF TECHNICALLY GIVING CONCERN ABOUT AI EATING THE LUNCH OF SOFTWARE BUSINESSES AND OTHER TYPES OF TECHNOLOGY. CERTAINLY IF YOU ARE SEEING AT A PRIVATE EQUITY. THEY WANT ANYTHING BUT AI. THEY WANT PEST CONTROL OR A PET COMPANY OR A MAKER OF SALT. ARE YOU SEEING THAT STUFF RIGHT NOW? >> WE ARE, ACTUALLY. IT IS AN ODD CONVERSATION SITTING HERE IN SAN FRANCISCO. IT IS NOT THAT WE HAVE CHANGED THEIR THESIS. THAT IS NOT THE IDEA. PEOPLE ARE STILL GOING TO EAT CHIPS. THEY ARE GOING TO WANT TO WORK OUT. THESE ARE TANGIBLE OR REAL-TIME THINGS THEY WILL ACTUALLY PARTAKE IN. THAT IS VERY DIFFICULT. I THINK TECHNOLOGY IS ABSOLUTELY IMPORTANT TO US. WE HAVE A GREAT TIME TO ASSESS WHAT TYPE OF SOFTWARE WE ARE USING. CAN'T AI ACTUALLY MAKE OUR BUSINESS MORE EFFICIENT? WE THINK ABOUT THE CONSUMER SPACE. IT IS ONE OF THE LARGEST GROSS PRIVATE POOLS ACROSS COMPANIES. DATA LEAKAGE IS ACTUALLY QUITE HIGH. WE THINK WITH AI THAT WILL CHANGE. THE CONVERSION FROM PROFIT WILL IMPROVE DRAMATICALLY. IT WILL NOT HAPPEN OVERNIGHT. BUT ABSOLUTELY WE WANT TO BE FLAT-FOOTED. ROMAINE: GREAT TO HAVE YOU BACK ON THE PROGRAM. FOCUSING ON THE CONSUMER. WHEN WE COME BACK WE WILL FOCUS IN ON WHAT TO LOOK FOR OVER THE NEXT FOUR HOURS. THIS IS BLOOMBERG. ♪ ROMAINE: LET'S SET YOU UP FOR WHAT MARKETS WILL HAVE THEIR EYES ON OF THE NEXT 24 HOURS. IT STARTS TOMORROW WITH RETAIL SALES REPORT. THERE IS AN EXPECTATION OF A LITTLE BIT OF A MODERATION WITHIN THEM. THINGS LOOK A LITTLE BIT BETTER. THE UNIVERSITY OF MICHIGAN SENTIMENT NUMBERS HAVE BEEN OSCILLATING DOWNWARD. BUT IMPROVING AS OF LATE. TOMORROW IS THE DEADLINE. FOR ALL OF THOSE CLOSELY WATCHED HEDGE FUNDS. THEY BOOSTED THEIR STATE AND AMAZON. WE WILL BE BACK HERE TOMORROW FOR THE CLOSE. STICK AROUND. BALANCE OF POWER IS UP NEXT AFTER THE BREAK HERE ON BLOOMBERG.